The Missouri Technology Corp. (MTC) plans to “quadruple” its pace of investment into early stage startups, thanks to an influx of nearly $100 million in federal funds.
MTC plans to use $95 million it has been allocated through the U.S. Treasury Department’s State Small Business Credit Initiative (SSBCI) to significantly ramp up its venture capital program and pursue new programs to finance socially and economically disadvantaged businesses.
Created by the Missouri General Assembly, MTC is a public-private partnership designed to promote entrepreneurship and provide investment to startups and entrepreneur support organizations. Through its venture capital program, IDEA Fund, MTC has provided more than $45 million in financing to roughly 140 startups located throughout Missouri. Local startups MTC has backed include Benson Hill, Arch Oncology and FinLocker.
Initially created in 2010, the federal SSBCI program was reauthorized through the American Rescue Plan, allocating $10 billion to U.S. states, territories and Tribal governments. MTC will receive its $95 million in three tranches and has been allocated $27 million of that capital. MTC Executive Director Jack Scatizzi said MTC needs to invest 80% of the first tranche before it can receive the second batch of funding.
MTC is approved to move the $95 million into its IDEA Fund, but Scatizzi said it is pursuing other avenues to provide the capital to businesses. MTC said about $40 million of the $95 million needs to be given to socially and economically disadvantaged businesses and it has issued requests for proposals to launch new financing initiatives that would target those businesses. It asked for proposals for loan guarantee, loan participation and debt-equity hybrid programs. The requests for proposals closed earlier this month, and MTC said that it hopes to launch the new programs early next year, pending federal approval.
While it plans to launch new programs, Scatizzi said MTC expects the majority of SSBCI funding to be deployed through its IDEA Fund over eight to 10 years. In 2011, MTC received $24 million from the first iteration of the SSBCI program, using that capital to make venture investments in 80 startups that went on to raise $760 million from other investors. Scatizzi said he expects this new iteration of SSBCI funds to have a similar impact.
“We certainly see this as being able to fund our direct investments at a pace we haven’t been at in a number of years,” he said.
In recent years, Scatizzi said MTC has done one application cycle annually for its venture capital program, investing roughly $1 million to $2 million per year. With the SSBCI funding, MTC will accept applications for the entire year, with plans to review and dole out investments quarterly. Scatizzi envisions MTC being able to allocate $8 million to $10 million per year.
“We’re essentially quadrupling our pace over the past three or four years,” he said.
MTC’s IDEA Fund includes three venture capital programs that provide matching equity or convertible debt investments up to $100,000; $500,000 and $2 million. MTC is currently accepting applications for its funding programs.
MTC is required to match every SSBCI dollar it invests with $10 dollars from the private sector. The IDEA Fund is already structured as a co-investment program, meaning startups that seek capital from MTC must match it with private funding. Scatizzi said investments made by MTC from the SSBCI funds it received in 2011 have been matched by around $30 of private investment for every dollar MTC awarded to the startups.
The SSBCI funding comes as MTC has begun implementing a strategic planpublished earlier this year. Scatizzi said the influx of federal funds will help MTC meet its strategic priority to help spur more investment into early stage companies throughout the state.
